Credit Card Expert

How To Eliminate Credit Card Debt

Eliminating credit card debt involves much more than first meets the eye.

Doing away with debt can be extremely challenging for many people. It is not enough to just pay a little more to each credit card company in the hopes of finally getting their debt load under control.

It can often mean a big change in lifestyle.

One thing is certain. It is very hard to make headway on credit card debt if card use continues. Eliminating debt could well mean a change in lifestyle and a big shift in spending habits.

Just how important is that purchase that is being considered? Is it a necessity? Or is it a luxury? Is it needed "right now?" Or is it something that can wait until it can be purchased with cash? Credit cards are just so darned convenient. That new outfit, big screen T.V., or Caribbean cruise is only a signature away. Why cook when fine dining at the best restaurants is at your fingertips?

There are several things that can be done to eliminate credit card debt load that has spun way out of control.

PHONE EVERY CREDIT CARD COMPANY:

I was amazed at just how well this works. I have phoned credit card companies and simply said, "I have several charge cards, and you have the highest interest rate of all of them. Your interest rate is 16% and the highest I am paying is 13%." I was floored when the response often went like this. "Would it suit you if we matched that interest rate and lowered ours to 13%?"

"Hmmmm. Well, let me think. Oh, okay!"

Trust me, it was that easy. Several unspoken things are happening here that should be recognized. First of all, you are the customer and you are not happy. Secondly, there is always the chance that a consumer will just give up and simply declare personal bankruptcy. It is far more logical for a company to charge a bit less interest when the alternative is to lose thousands of dollars in unpaid debts. Also, our mailboxes are being inundated with letters that proclaim, "switch your high interest rate cards to our company and pay only 3% for the next year!" They want to keep your business! Believe it or not, I did this 3 times with the same result. I just went down the line. I told the company I was paying 13% to that the highest I was paying was 10.5%. So they matched it! Make those calls and you can save hundreds of dollars in interest.

Don't bother talking interests rates with the operator who answers the phone. In most cases they can't make those decisions. Just say, "I would like to talk to a supervisor about my interest rates." That's all you have to say. There is always someone there who can make the decision.

COMMIT TO DOING WITHOUT:

So the big cruise might have to be given up for a few years. Take the opportunity to have a much less expensive holiday close to home. Resist buying the items that are nothing more than impulsive purchases. Use common sense and sound judgment. It will mean living a far different lifestyle. It will mean being more aware of what is a luxury and what is a necessity. It will mean going without many things that were always available with a credit card handy.

CUT UP THOSE CARDS:

This is one sure way to resist the temptation of using those cards. Just get rid of them. Cut them up. Often it is wise to keep one that has a low available balance. There are times a credit card can be used to hold a hotel room for instance, should it be necessary. Cutting up credit cards can be a pretty traumatic experience for many. They have such a hold on people. They seem like they are indispensable, but they aren't. Get out those scissors!

CONSOLIDATE YOUR DEBT:

I had one letter from a company that claimed other credit card balances could be switched over to them and the interest would be 0% for one year! However, there is one thing to be aware of when considering these offers. Often they will look at a person's debt load and only give you a portion of the money you really need. For instance, say the total amount owing is $50,000. They might offer you $5000 to pay towards one of the cards. I don't think that is even worth the bother. I would suggest phoning them and saying this. "I would like to have one credit card payment. Instead of paying four companies I would like to pay just one. Would you consider loaning me enough to paying off all my balances so I only have one payment to make every month?" So if you are paying a total of $1500 a month to all these card companies, what you are saying is, you would like to make one payment of $1500 per month. This is a long shot and will depend largely on how well you have kept up with your payments. You can have a lot of debt and have an "excellent" credit rating because payments are never missed.

Also keep in mind that the interest rate at the end of the one year of 0% will most likely be quite high. Read the fine print and you will probably see that it is 16%-18%. Don't get sucked into that. While you are on the phone suggest to them that you would like a reasonable interest rate at the end of the one year 0% interest time frame. Say for instance, 12% or the best rate you can bargain.

Chances are, if you owe too much, they won't consider it, but I would give it a try. All they can say is no. But if you ever found a company that will go for it, you will save thousands of dollars in interest.

WHO TO PAY FIRST:

If consolidation is not in the realm of possibility, then a sound payment schedule would be the wisest thing. If all the interest rates have been bargained down as far as possible, it's time to start paying off all that debt.

Say you owe $16,000, $14,000, $12,000 and $8000 on four different credit cards. Make all the "minimum" payments on the 3 largest balances. Pay the minimum payment on the $8000 balance "plus" as much extra as is possible. So if by budgeting, and being careful with your money, or finding another source of income, you can pay an extra $300-$400 on that $8000 balance every month, some real headway will be made in eliminating that debt. Say you are paying a total of $600 a month on that card. When it is paid off, put that $600 "plus" the minimum monthly payment toward the $12,000 loan(which will also have come down a bit my now as well)So now you may be paying $1100 a month towards the second card. When that is paid off, put all that money toward the third card. By the time you reach the fourth card, you could be paying back $1800-$2000 a month, because now everything is going towards the last card. you will be amazed how fast that debt comes down. You are really cutting into the interest rate by over paying the minimum balance.

Of course the key to eliminating credit card debt depends on "not" using them any more once a system to pay them off is being implemented. Further spending would simply be counter-productive.

Sure it will take tons of will-power and comittment to take this big step, but just imagine when that last statement arrives from the "final" credit card company. The statement that has 0.00 for the balance owing!

Best of all, now you will have all that  cash to spend every month any way you like and there will be no credit card payments to make and no interest to pay.

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